VeronikaG

Hello everyone,

I am a self employed fashion designer and have been running my own business for the past 2 years in the UK. My husband and I have decided to move to Los Angeles , California next year. He is an US citizen, I am applying for a CR1 Visa. If all goes well we should be ready to make the big move in May 2017.

Ideally I would like to continue being self employed in CA, as here in the UK my business has been doing great and I'm earning considerably more than what I would earn in a full time employment. I really hope that would be the case in the US too.. If not then I will have to look for a full time job.

However I would need to start again once we move, in terms of clients and registering /running the company. Is anyone of you here working as a self employed / contractor in the US? Where do I start from in terms of registering with government and is there anything specific I need to know or do to be able to run my business over there?

Any advise on the matter or any experiences would be very helpful!

Thanks
VeronikaG

ian-mstm

Good luck with your plans, but yours isn't actually an immigration-related question so hopefully a moderator can move the thread to a more appropriate forum.

Ian

Noorah101

Done.

Rene
Moderator

Chrisdc

It's actually super-easy. If you are working as a freelancer, you don't need to do anything special. You can be a sole proprietor just using your personal Social Security Number.

You will need to pay the LA city business tax which has created a headache in recent years:
L.A. Freelancers Are Getting Hosed by the City's "Tax Discovery Program" | L.A. Weekly

You will also need to pay the employer-side taxes for yourself (Social Security taxes normally paid by the employer on behalf of the employee) - here is a guide:
https://www.ssa.gov/pubs/EN-05-10022.pdf

There is no such thing as PAYE here - everyone has to file a tax return at the end of the year.
You will definitely want to have an accountant help you - it's normal for normal working people to pay an accountant (CPA) to do their annual tax return. They can advise you on how to file your business taxes, and if and when you need to start paying quarterly estimated tax (after the first year in business.)

I would advise an accountant experienced with expat issues.

If you want to actually open a Limited Liability Company, you should consult with an accountant and/or lawyer. There is a ton of great advice at nolo.com on how to open a single-member LLC.

One thing to be aware of is that there are two ways of being paid by a client - as an "Independent Contractor" and as an "Employee." In the former, you can just send an invoice and they can send you a check for your work. In the latter situation you will be paid through a payroll company. There is a lot of debate over which category different jobs fall into. It's wise to make sure you are being paid the correct way. Here is some guidance:
Independent contractors

Many client (payment) relationships begin with being asked for a W9:
Here is an example should you be asked to fill one out.
https://www.irs.gov/uac/about-form-w9

HTH
C

VeronikaG

Thank you very much for your detailed reply!

Hotscot

'If you want to actually open a Limited Liability Company, you should consult with an accountant and/or lawyer.'

Or you can do it on your own if you take the time to do research. I use an LLC which allows me to to simplify my taxes via my personal return.
Please note that there is a CA $800 tax whether or not you've made any income.

VeronikaG

Thank you for your reply. Is that an annual tax or a one off fee to open the company ? How are you finding it being self employed in CA? I'm still in a dilemma if to continue with what I do here in the UK ( self employed ) or to settle with a full time job.

Hotscot

I find an LLC fairly easy to manage, (although there are other structures of course), and because the ultimate profit or loss is reported in personal taxes it's relatively straightforward. Especially if you can keep 'profits' low through deductions.

The $800 is a minimum franchise tax for the benefit of doing business. It's annual unfortunately.
There's also revenue fees.

Here's a link

California LLC Taxes Fees CA Limited Liability Company

Steve_

My advice to the OP is to go to the SBA locally and ask the question. Mainly because we have this question on here all the time and my fingers are tired.

There are all kinds of ways of being self-employed in the US. You can be self-employed and file schedule SE with your 1040 and claim the self-employment tax credit. And you can if you want make it into an LLC. That's probably the simplest method.

The more clever method is to use an S-corp and pay yourself using dividends or a combination of dividends and payroll, so you pay a bit of payroll tax so you still get some Social Security, but the main reason why is so you qualify for Medicare when you hit 65.

The problem with an S-corp is that it is a lot more paperwork and typically people usually declare about $40,000 on payroll, so it doesn't make sense unless you earn over $40,000 or so. But then again, maybe you don't care about payroll taxes as much.

If you're going to use a corporation, typically it's better to set it up in Delaware or Nevada because they don't have information-sharing agreements with the IRS and piercing the corporate veil is next to impossible. You still have to file corporate tax returns of course.

Or if you're thinking of hiring people then you just use a C-corp and set up payroll. Bear in mind C and S corporations are a designation given under federal tax law, forms of corporation vary widely under State law but usually most State forms of corporation can be either a C or S corporation for federal tax purposes.

As someone mentioned, employers love to describe people as contractors rather than employees so they can pay them on a 1099 instead of a W-2, the advantage to them being they don't have to pay the payroll taxes or put you on their health plan.

This is something to bear in mind, the costs of being self-employed can be quite high. Although you can claim the self-employment credit to eliminate the employer's half of FICA, you've got to have some form of healthcare plan. And you're going to generally have more tax paperwork to plough through as well.

VeronikaG

Thank you all for the information! You've been very helpful

kins

Something worth knowing is that if you're self-employed, and buying health insurance as an individual (ie you're not on your other half's insurance) then you can write off your health insurance premiums against your income for tax purposes.